USD/CHF Trades Sideways at 0.8060 as Fed Rate Cut Bets Weigh on Dollar

USD/CHF Steadies Around 0.8060 as Fed Cut Bets and Swiss Inflation Drive Uncertainty

Dollar pressured by rising Fed rate cut odds
The USD/CHF currency pair remained subdued near 0.8060 in Wednesday’s late Asian session, as the US Dollar (USD) continues to face pressure due to dovish expectations surrounding the Federal Reserve’s next monetary policy move. The cautious tone follows the release of July’s US Consumer Price Index (CPI), which showed modest inflationary pressure — a development that strengthens the case for a rate cut in September.

According to the CME FedWatch Tool, markets now assign a 94% probability to a 25-basis point rate cut next month, sharply up from 86% just two days prior. The US Dollar Index (DXY) reflects this weakening sentiment, trading at a two-week low near the 98.00 mark.

Mixed US inflation data fuels cautious Fed outlook
The July headline CPI remained steady at 2.7% YoY, just shy of the 2.8% forecast. However, the core CPI — which excludes volatile food and energy prices — rose to 3.1%, beating expectations of 3.0% and the previous 2.9%. This mixed print has not deterred markets from raising bets on a more accommodative Fed, as traders focus more on the broader disinflation trend and global headwinds.

SNB policy in focus as Swiss inflation edges up
Meanwhile, on the Swiss side, inflation remains well below the Swiss National Bank's (SNB) target range of 2%, although it ticked up slightly. The Swiss Consumer Price Index rose by 0.2% YoY in July, above both the forecast and June's reading of 0.1%. While inflation remains tepid, the mild improvement could influence whether the SNB considers further rate adjustments at its upcoming policy meeting later this month.

Outlook
The USD/CHF pair may remain in a tight trading range as traders await clarity from both central banks. A confirmed shift in the Fed’s tone during upcoming speeches or a stronger-than-expected US PPI report could inject fresh momentum into the pair. Meanwhile, signs of policy movement from the SNB could influence the Franc's direction.